Miliband takes inspiration from Germany with new regional banks policy

Labour would establish a new network of banks, modelled on the German <i>Sparkassen</i>, with a duty to promote growth in underdeveloped regions.

The "blank sheet of paper" is being filled. Ed Miliband will announce today that a Labour government would establish a new network of regional banks as partners of a British Investment Bank. In his speech at the British Chambers of Commerce conference this morning, he will say: "We do not just need a single investment serving the country. We need a regional banking system serving each and every region of the country. 

"Regional banks with a mission to serve that region and that region alone, not banks that are likely to say no but banks that know your region and your business; not banks that you mistrust, but banks you can come to trust."

The policy, like much of Miliband's political economy, has a distinctly German flavour. Last February, Chuka Umunna visited the country to study the Sparkassen, locally managed banks with a duty to promote growth in economically underdeveloped regions. The shadow business secretary said: 

There is quite a lot we can learn, in particular from the savings banks here, the Sparkassen, which have a much better relationship, if you like, with their businesses, the people here, their banking structure's very local in its nature, the people running those local banks really understand and get to know the businesses, so they're in a good position to assess the risk and provide the support needed to. 

Labour's Small Business Taskforce, which publishes its final report today, has identified the lack of  finance for small and medium sized enterprises as one of the factors restricting growth and innovation. It suggests that a new German-style network of regional banks (dubbed "Sparks") could help promote a more balanced economy.

There are important details to be worked out, most notably where the banks will operate and how they will be capitalised, but this is an encouraging example of Miliband's long-term focus on rebuilding "the foundations" of the economy. 

Ed Miliband walks through Hyde Park after addressing TUC members at the end of a march in protest against the government's austerity measures on October 20, 2012. Photograph: Getty Images.

George Eaton is political editor of the New Statesman.

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Why Angela Merkel's comments about the UK and US shouldn't be given too much weight

The Chancellor's comments are aimed at a domestic and European audience, and she won't be abandoning Anglo-German relationships just yet.

Angela Merkel’s latest remarks do not seem well-judged but should not be given undue significance. Speaking as part of a rally in Munich for her sister party, the CSU, the German Chancellor claimed “we Europeans must really take our own fate into our hands”.

The comments should be read in the context of September's German elections and Merkel’s determination to restrain the fortune of her main political rival, Martin Schulz – obviously a strong Europhile and a committed Trump critic. Sigmar Gabriel - previously seen as a candidate to lead the left-wing SPD - has for some time been pressing for Germany and Europe to have “enough self-confidence” to stand up to Trump. He called for a “self-confident position, not just on behalf of us Germans but all Europeans”. Merkel is in part responding to this pressure.

Her words were well received by her audience. The beer hall crowd erupted into sustained applause. But taking an implicit pop at Donald Trump is hardly likely to be a divisive tactic at such a gathering. Criticising the UK post-Brexit and the US under Trump is the sort of virtue signalling guaranteed to ensure a good clap.

It’s not clear that the comments represent that much of a new departure, as she herself has since claimed. She said something similar earlier this year. In January, after the publication of Donald Trump’s interview with The Times and Bild, she said that “we Europeans have our fate in our own hands”.

At one level what Merkel said is something of a truism: in two year’s time Britain will no longer be directly deciding the fate of the EU. In future no British Prime Minister will attend the European Council, and British MEPs will leave the Parliament at the next round of European elections in 2019. Yet Merkel’s words “we Europeans”, conflate Europe and the EU, something she has previously rejected. Back in July last year, at a joint press conference with Theresa May, she said: “the UK after all remains part of Europe, if not of the Union”.

At the same press conference, Merkel also confirmed that the EU and the UK would need to continue to work together. At that time she even used the first person plural to include Britain, saying “we have certain missions also to fulfil with the rest of the world” – there the ‘we’ meant Britain and the EU, now the 'we' excludes Britain.

Her comments surely also mark a frustration born of difficulties at the G7 summit over climate change, but Britain and Germany agreed at the meeting in Sicily on the Paris Accord. More broadly, the next few months will be crucial for determining the future relationship between Britain and the EU. There will be many difficult negotiations ahead.

Merkel is widely expected to remain the German Chancellor after this autumn’s election. As the single most powerful individual in the EU27, she is the most crucial person in determining future relations between the UK and the EU. Indeed, to some extent, it was her intransigence during Cameron’s ‘renegotiation’ which precipitated Brexit itself. She also needs to watch with care growing irritation across the EU at the (perceived) extent of German influence and control over the institutions and direction of the European project. Recent reports in the Frankfurter Allgemeine Zeitung which suggested a Merkel plan for Jens Weidmann of the Bundesbank to succeed Mario Draghi at the ECB have not gone down well across southern Europe. For those critics, the hands controlling the fate of Europe are Merkel’s.

Brexit remains a crucial challenge for the EU. How the issue is handled will shape the future of the Union. Many across Europe’s capitals are worried that Brussels risks driving Britain further away than Brexit will require; they are worried lest the Channel becomes metaphorically wider and Britain turns its back on the continent. On the UK side, Theresa May has accepted the EU, and particularly Merkel’s, insistence, that there can be no cherry picking, and therefore she has committed to leaving the single market as well as the EU. May has offered a “deep and special” partnership and a comprehensive free trading arrangement. Merkel should welcome Britain’s clarity. She must work with new French President Emmanuel Macron and others to lead the EU towards a new relationship with Britain – a close partnership which protects free trade, security and the other forms of cooperation which benefit all Europeans.

Henry Newman is the director of Open Europe. He tweets @henrynewman.

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